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प्रश्न
State the limitations of written down value method of depreciation.
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उत्तर
Following are the limitations of the written down value method.
- Assets cannot be completely written off:
Under this method, the value of an asset even if it becomes obsolete and useless, cannot be reduced to zero and some balance would continue in the asset account. - Ignores the interest factor:
This method does not take into account the loss of interest on the amount invested in the asset. The amount would have earned interest, had it been invested outside the business is not considered. - Difficulty in determining the rate of depreciation:
Under this method, the rate of providing depreciation cannot be easily determined. The rate is generally kept higher because it takes very long time to write off an asset down to its scrap value. - Ignores the actual use of the asset:
Under this method, a fixed rate of depreciation is provided on the written down value of the asset by applying the predetermined rate of depreciation on its original cost. But, the actual use of the asset is not considered in the computation of depreciation.
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संबंधित प्रश्न
State whether the following statement is True or False with reasons:
Depreciation is charged on fixed assets.
State whether the following statement is True or False with reasons:
The Profit or Loss on sale of fixed asset is ascertained only after charging depreciation.
Do you agree or disagree with the following statement:
By charging depreciation on fixed assets ascertainment of true and fair financial position is possible.
Complete the following sentence:
Wages paid for Installation/fixation of Machinery is debited to ______ account.
Under straight-line method, the amount of depreciation is ______.
Depreciation is to be calculated from the date when ______.
Give the formula to find out the amount and rate of depreciation under straight line method of depreciation.
An asset is purchased for ₹ 50,000. The rate of depreciation is 15% p.a. Calculate the annual depreciation for the first two years under the diminishing balance method.
If the cost of the Computer is ₹ 40,000 and depreciation is to be charged at 8% p.a. Calculate the amount of depreciation.
Vishal Company, Dhule, purchased Machinery costing ₹ 60,000 on 1st April 2016. They purchased further Machinery on 1st October 2017, costing ₹ 30,000, and on 1st July 2018, costing ₹ 20,000. On 1st Jan 2019, one-third of the Machinery, which was purchased on 1st April 2016, became obsolete and it was sold for ₹ 18,000.
Assume that, company account closes on 31st March every year.
Show Machinery Account for the first three(3) years and pass journal entries for the Third year, after charging depreciation at 10% p.a. on Written Down Value Method.
